Details of the Situation in Japan; Interview with the Japanese Ambassador to the US; Experts Discuss the Nuclear Reactor Situation; Senator Dick Durbin Interviewed; Senator Jon Kyl and Congressman Kevin McCarthy Discuss the Economy and Job Creation

Aired March 13, 2011 - 09:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CANDY CROWLY, HOST: The known death toll in Japan's tsunami disaster is now over 1200 but a government official believes more than 10,000 people may have died in one region alone. And this morning, the possibility of meltdowns in two nuclear reactors.

The Japanese government believes there could be a second hydrogen explosion similar to one yesterday in the building housing another reactor. 200,000 people have been evacuated from the reactor area, 160 people have been checked for radiation exposure, at least nine tested positive and health authorities are already distributing iodine tablets as an antidote.

Public broadcasting in Japan told evacuees to close doors and windows, put a wet towel over their mouth and cover up. This morning, the prime minister announced rolling power outages throughout the country and called this Japan's most difficult moment since World War II.

Today catastrophe in Japan, the latest from ambassador Ichiro Fujisaki.

(BEGIN VIDEO CLIP)

ICHIRO FUJISAKI, JAPANESE AMBASSADOR TO US: This is the worst earthquake we have ever had.

(END VIDEO CLIP)

CROWLEY: And then experts take on the nuclear hazard with physicist James Acton and lessons for America with former FEMA director James Lee Witt.

For the latest in Japan, I am joined here in Washington by Ichiro Fujisake, Japanese ambassador to the United States. Mr. Ambassador thank you for being here. I know such a difficult time for your country.

FUJISAKI: Thank you very much for having me.

CROWLEY: Give us the latest on these two very troublesome nuclear reactors. What do you know about what is happening?

FUJISAKI: You're talking about two nuclear reactor sites in Fukushima, number one and number two. We have six reactors we are now coping with. And two out of the six of them we are putting water in order to cool down.

CROWLEY: Sea water.

FUJISAKI: Sea water. Four of them, we are trying to take out vapor through filter, to relax the pressure in the container. And we are coping with those issues.

CROWLEY: Some of the nuclear experts that we've talked to say the sea -- using sea water to cool it really is a last resort, that this does signal that there -- that you are nearing the point where this could be, again, catastrophic, not that there haven't already been catastrophic things happening. How worried is the Japanese government there may be under way a meltdown?

FUJISAKI: The Japanese government is very seriously coping with this issue because this is a very important issue. And two measures are taken. One is to order all the people within radius of 20 kilometers or 10 kilometers to get out of that area. That's one.

Second is to cope with the issue itself. As you say, they are putting water and also trying to take out vapor. It's a different measure to different reactors.

As for the sea water, yes, for the reactor itself, it is better to put in clear water. But we do not have enough supply of clear water there so we are putting in sea water.

CROWLEY: So it's not necessarily a sign that things are dire, it is a sign that you don't have the kind of water you'd like to use?

FUJISAKI: We do not -- if there's clear water, it would be better for reactor itself, but in order to cool down, sea water would have the same effect as clear water. The effect we're trying to get is to get the reactor to cool down.

CROWLEY: What is the level of concern? Does the Japanese government feel that there is a very real possibility of a meltdown? Do they believe there is a very real possibility there will be a second explosion in the second reactor?

FUJISAKI: First, as for the explosion, you said, there was an explosion in the first reactor. But it was not reactor nor container. It was an outer building. It didn't have any radiographic material getting out of the container or reactor. So, I have to emphasize that point -- radioactive, I'm sorry.

And as for the meltdown, yes, there could have been a default of part of a fuel rod or partly could have melted as well, but have I to say, it was not a sizable core reactor. So, which you would call it a meltdown generally. So, it is not that situation.

CROWLEY: What are your plans to keep people safe if there is a larger -- or proves to be more radiation going into the atmosphere?

FUJISAKI: As I have said, two measures are now taken in order to cope with the situation directly so that it will not lead to more serious situation. And the other is to take a precaution to ask people to be out of that region. So, these measures will continue to be taken.

CROWLEY: There are some reports out there that suggest the warning of the tsunami did not come soon enough to make a difference. Has the Japanese government begun to look at whether the warning system went off as it should have?

FUJISAKI: The warning system of tsunami, I are to say in Japan, is better than any country. However, of course, there could always be an improvement. And you always have to look at the improvements. But we have been helping other countries to build the tsunami alarm system as well.

What is good is today, I think, there are almost very few possibility that another tsunami is coming. But still, there's aftershock. We have felt one only a few hours ago. So, we have to be always very careful about this.

CROWLEY: Tell me about the kind of response you've gotten globally to this.

FUJISAKI: We are very gratified that people around the world, so many countries and regions and international organizations are extends hands to Japan, saying this is not only Japan problem, they will be helping. This is a challenge to international community as a whole. Sending rescue teams with dogs and, for example, United States, they are sending aircraft carriers and other naval ships and helping to lift emergency food to those who are suffering from the situation. And we are very grateful to that.

Not only government, a lot of international organizations or NGOs are helping us -- Red Cross, U.S. Red Cross is extending their hand. So, if the American people would like to help us, please get in touch with those Red Cross and NGOs and we are very gratified for that.

CROWLEY: Thank you so much, Mr. Ambassador. We wish you luck in the days ahead.

FUJISAKI: Thank you very much.

CROWLEY: Up next, a nuclear power expert gives us his takes on a fears of a partial meltdown in Japan.

(COMMERCIAL BREAK)

CROWLEY: Joining me now, James Acton, a physicist at the Carnegie Endowment.

Can you decipher this for us? What is happening with these two nuclear reactors?

JAMES ACTON, CARNEGIE ENDOWNMENT: Well Candy, about 24, maybe a few more hours ago than that, they started pumping sea water into the core of the first of the reactors. Now you only do that if you basically decided to write off the reactor anyway.

CROWLEY: Does it rust it out and it's no longer useable?

ACTON: Correct. So you're only going to do that if you're seriously worried about the possibility of significant core melting.

Overnight, they then started a similar procedure in reactor three. Now what's significant about unit three is unit three was not a reactor that was on the critical list, as it were. The cooling systems appeared to be working perfectly well. And then at some point for reasons that we don't fully understand, the cooling system that was being used stopped working and a backup failed to kick in. And so as a last resort in that case, they had to stop putting sea water in.

Now what's worrying about this is we knew they had problems supplying the pumps with electricity. It now appears that there may have been actual damage to the pumping systems or perhaps the electrical components that control them caused either by the earthquake or by the tsunami.

CROWLEY: So, what's the -- I mean, can you give us a probability or -- if you look at it -- you heard the ambassador. He said, you know, we're doing everything we can. He seemed to -- obviously, they want things to get under control and there isn't a meltdown. But what is the probability of a meltdown under the circumstances that you now see?

ACTON: Well, there's not nearly enough information in the public domain if we have to put numbers on any of this. But let me make two points. Firstly, I think meltdown is an unhelpful word because there's actually a huge spectrum of possibilities. We've already seen the Japanese safety authorities who have acknowledged there's been some partial melting of the core, which at the better end of this bad spectrum. But there's a whole spectrum of possibilities.

Secondly, melting of the core might release substantial amounts of radio activity into the environment but it does not necessarily do so. The Three Mile Island accident there was a very large degree of core melting, but actually remarkably little quantity of radiation released into the environment.

So there's both significant uncertainty about what's going on at the moment and significant uncertainty about the possible outcomes.

CROWLEY: So bottom line is, it could be controllable and not as bad as the term meltdown might sound, or it could be pretty catastrophic? And we don't know what range this is in? ACTON: That's right. I mean, when -- when you say catastrophe, I think what immediately comes to mind is Chernobyl and I think that's a very unhelpful thing to come to people's minds. We're almost -- it's almost inconceivable that we would have explosion of the reactor vessel itself spewing radiation everywhere. I think that worst case outcome is unbelievably unlikely in this case.

CROWLEY: So can you tell from -- I mean look, this is a country that suffered first an earthquake and then a tsunami. And now is having all these aftershocks that are quite large. So, the question is, it seems like the pumping system has failed in more than two actually, but in these two in particular. So, did it fail because the system doesn't work or did it fail because there's some things that a reactor can't handle and, you know, a huge earthquake is one of them?

ACTON: Well, you know, there's going to be a major investigation to understand -- to uncover exactly what went on. But let me say this, Candy, the Japanese authorities say safety incredibly seriously. And I have no doubt whatsoever that this reactor was capable of withstanding whatever size of earthquake they designated it ought to withstand. I suspect what the investigation will reveal was that it wasn't designed to withstand the size of earthquake that actually took place.

CROWLEY: So, in the end, you know, your imagination has to -- when you're building these things has to be larger than, you know, the predictive capability for earthquakes.

ACTON: That's right. I mean, you know, one of the problems they had at Kashiwazaki in 2007 was they designed it to withstand a certain size of earthquake but the actual shaking as it were at some point was always twice the designed limit. Now on that occasion, safety systems kicked in. The reactor was -- the reactors were cooled relatively quickly without problem. This unbelievably catastrophic event, not just the largest earthquake in their history, but then a huge tsunami has clearly overwhelmed many of the safety systems at the reactor.

CROWLEY: James Acton at the Carnegie Endowment, thank you so much for joining us.

We'll be right back.

(COMMERCIAL BREAK)

CROWLEY: The magnitude of this quake is hard to comprehend. A U.S. Geological Survey scientist told CNN that the quake moved the main island of Japan eight feet and shifted the earth on it's axis nearly four inches. Here to discuss how countries like Japan can manage national disasters, James Lee Witt, former FEMA director and now CEO of a crisis management firm that worked on the reconstruction after the Indian ocean tsunami.

Mr. Witt, thank you for joining us. Right now in Japan, the essential work is about trying to find people. What are they up against and what are you -- what are they worried about at this point? I have to guess it's running out of time.

JAMES LEE WITT, FRM. FEMA DIRECTOR: Well, the first 72 hours is really important. But of course, search and rescue teams that are in there now and the Japanese military and American military, those teams going in there with the dogs, the biggest concern is debris and also buildings that have partially collapsed. The safety of those teams, you know, they have engineers with them. And they will be looking at that as well. But also trying to get as many people out that they can when they find them.

CROWLEY: Now, we are told over and over again that Japan, there's no country on earth that exceeds Japan in its preparedness for earthquakes, first of all, because they have so many of them, but as well for emergencies. And yet we look and we are looking at some devastating numbers here.

What is the lesson? Is it that you cannot prepare for anything this big or is it that Japan was not quite there in terms of preparedness? What's your take?

WITT: Well, you know, Candy, after the Kobe earthquake, President Clinton sent me over there. What happens, Japanese government has some the most stringent seismic earthquake codes as anyone. But the thing of it is in Japan as well as the United States we have inherited a traditional stock of buildings that were built before the new seismic codes and getting those buildings retrofitted is to me at least life safety is very important.

But they have buildings, as well as we do, that are not up to the type of code they need to be.

CROWLEY: Well then let me bring you here to the U.S. because I think in general, the American people look at what's happening in Japan and it seems like something that could happen to Japan, but not something that could happen here in the U.S. it's just such a huge magnitude. What are the possibilities here in the U.S.? Because I know some of this must have kept you up late at night as FEMA director.

WITT: Yeah, it did. And the thing of it is here in the United States, particularly California, Oregon and Washington state, and even in Arkansas, and even in the city of New York has earthquake fault, so 1811, 1812 in Arkansas, the New Madrid fault, we had an 8.0 earthquake. It rang the bells on the churches in Boston. And right now we found a new fault in Arkansas, they call it the Guy fault, that just recently had a 5.8 and they're having like hundreds a day of smaller quakes. And that fault line's getting bigger.

But it was an unknown fault line. And we wouldn't have the tsunami possibility unless it's on the west coast and out in the ocean which could create one, but in Japan and here, they also have all of the warning systems, the buoys out there that would identify a tsunami very quickly. And they could evacuate.

But in Japan right now, that's massive debris and destruction. And it's going to take a while.

CROWLEY: Well, you bring up the New Madrid fault lines. Do you think -- are you confident that should there be -- and I think a lot of people believe the New Madrid at some point is going to lead to a big earthquake. Are we ready? Are the buildings secure? I mean, what is the potential here? What are we learning in Japan that applies here?

WITT; Well, back when I was director in Arkansas for President Clinton, then governor, we passed legislation for seismic building codes in Arkansas. And one of the most important things was to build the bridges that would be earthquake resistant. But we still have an awful lot of buildings that were built before these codes were put in place. And so that concerns me a great deal. Schools, you know, older buildings, public buildings, that were built out of concrete blocks. And you know, they would be in danger.

CROWLEY: James Lee Witt, thank you so much for your time. We appreciate it this morning.

Up next, we're going to go to Japan for the latest on the search and rescue effort.

(COMMERCIAL BREAK)

CROWLEY: Joining us from Sendai, Japan is CNN's Kyung Lah -- Kyung.

KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: Well Candy, this is now almost 56 hours after the earthquake, after the tsunami came ashore and devastated parts of northern Japan. This is still very early hours of the emergency and still very much a search and rescue operation.

(BEGIN VIDEOTAPE)

LAH: Military helicopters continue the seven for the living in the tsunami-ravaged city of Sendai. Two days into the disaster in this one residential area called Futaki rescuers are still pulling the injured to safety. A silver gurney lifts a survivor.

But increasingly, the found are the dead. Search crews pull a body from the water, somebody that drown in a car, another body lies under this tarp. A large number of military and search crews finding more dead and fewer living victims as the hours pass.

"Frightening beyond belief," says Iroki Otomo (ph). "I have no words." Otomo's (ph) mother and uncle are missing and feared dead. They were both home as the tsunami came in to Futaki. Otomo (ph) and his father now waiting for word.

Witnesses here say the first tsunami wave was as high as the top of this tree line, tossing cars like toys into piles, blasting out windows, crushing homes or sweeping them away completely. This flooded area once had a row of houses, now gone.

The force of the tsunami flipped this truck completely upside down. It landed here at this elementary school, wheels up. This school is quite a bit inland, but you really start to see the signs of the tsunami. You can see how high the water and the debris line here is, especially against the white wall of this school. And the power of this tsunami. The doors of this school are completely blown off. And look down the hallway. That's a car.

450 students, teachers and workers were in the school when the tsunami warning came. Many managed to escape. But the Japanese military says they pulled bodies from the school.

The residents of Futaki started returning home, but only briefly, and carrying out what they could to evacuation centers.

They face challenges on dry land: little gas, long lines wrapped around the few stations open and even longer lines of people, several blocks long at food and water distribution centers. A waiting game on multiple fronts for these tsunami survivors.

(END VIDEOTAPE)

LAH: So, those stores have mainly gone silent for the evening. They are not unable to eyeball anything while it's so dark. Sunrise is in about 8 1/2 hours. Those choppers will take to the air again. We're in the early hours, still hoping for survivors. But even talking to the people who are here, the people who are trying to find their relatives, Candy, you can see that the hope is starting to fade even in their eyes.

CROWLEY: These are the saddest times, the hours when you still have hope, but hope is fading. Thank you so much. Our CNN's Kyung Lah there in Sendai for us. We appreciate it.

CNN of course keeping up minute by minute with what's going on in Japan. But we want to take a turn up next to the budget battle here in the U.S. and the negotiations in congress to avoid a government shutdown next week.

(COMMERCIAL BREAK)

CROWLEY: Remember when congress agreed to a temporary spending bill, buying itself a little more time to reach a budget agreement and avoiding a government shutdown? Well, time's up. Congress has five days left to figure out what's next. To keep the government up and running through September, lawmakers need to approve a series of spending bills for fiscal year 2011, which, by the way, began five months ago. But they have been punting since October, passing five temporary extensions, keeping the government in business while Democrats and Republicans fought over where and by how much to cut federal spending.

If you watched the president's press conference Friday, you heard that a sixth extension is likely but not optimal.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We can't keep on running the government based on two-week extensions. That's irresponsible.

(END VIDEO CLIP)

CROWLEY: Still, temporary spending measures are pretty much SOP on Capitol Hill. The president voted for at least one when he was a senator.

Congress this week considers a another one and it looks like they're close to a deal. Proposed by Republicans, it would fund the government for three weeks through April 8th. And it would cut $6 billion from 2010 spending levels.

We will talk to key players in both parties starting with the number two Democrat, Senator Dick Durbin next.

(COMMERCIAL BREAK)

CROWLEY: Joining me from Chicago, Senator Dick Durbin, who is the second ranking senator in the Senate. Thank you for joining me, senator.

Let me ask you about the continuing resolution, which is just a stop-gap spending measure while you all try to get your act together. I'm assuming that that's going to pass, that there will be -- there's no real threat of a government shutdown.

SEN. DICK DURBIN, (D) ILLINOIS: No, I think it will pass in the House this week and later in the Senate. It buys us about three weeks. It includes cuts, which we have offered on the Democratic side in an effort to find a reasonable compromise here. I hope that the Republican leadership in the House will see this as a signal of good faith. We brought their budget before the Senate and it fell 16 votes short of passage, as did the Democratic budget.

We're in a position now where we need to sit down and reasonably come to a conclusion so that we can get about the business of governing this country.

CROWLEY: Well, I want to remind you of something that one your colleagues, Senator Claire McCaskill said -- she's from Missouri. And she was one of 10 senators on your side who voted against your budget. Which I think went down by more than the Republican budget did. So, I wanted you to just listen to Senator McCaskill again.

(BEGIN VIDEO CLIP)

SEN. CLAIRE MCCASKILL, (D) MISSOURI: There are way to many people in denial around here about the nature of the problem and how serious it is.

(END VIDEO CLIP) CROWLEY: Basically saying, look, Democrats, some Democrats don't have an idea how much money needs to be cut. What's your reaction to that?

DURBIN: My reaction is this -- we're not going to balance America's budget in the next six months. We should be taking care that we don't do things that damage our economy and really slow down our recovery. The notion, as the president said, of cutting hundreds of thousands of children off Head Start at this moment, cutting Pell grants for college students so they would have to drop out of school, delaying or stopping research in energy when we see gas prices going through the roof, suspending medical research for six or seven months. Listen, that goes way too far. And it goes in a direction not good for this country.

I'm part of a group, six senators, three Democrats and three Republicans, we're looking at this in honest and hard terms about how we deal with this deficit. Not in a matter of six months, but over a period of time so that we responsibly cut spending and don't do it at the expense of America's economic growth.

CROWLEY: But senator, what is the message if 10 of your own party members in the Senate vote against your budget saying -- basically saying most of them, not enough?

DURBIN: Most of them want more cuts. And we have come through with more cuts. It is likely we will debate that. But I think what the president has said, and I think he's very accurate in this regard, we are going to be reasonable to get through this current political difficulty, but let's not do things that will harm us for a long time to come.

Cutting money for education and worker trending in the midst of a recession is not a good idea. Cutting back on research when we're in a fierce global competition so that America can create good paying jobs right here at home is not a good idea. Let's do thoughtful things.

CROWLEY: You know I know that you talk about thoughtful things, but the truth is you have had all last year to do this budget. And you didn't get it done by the deadline, which is October 1. Now we're doing yet another -- your sixth continues resolution. Is this any way to run a railroad? I mean, isn't why we always get into these things -- you know we can't cut Head Start, we can't do this. Shouldn't you all have figured this out last year?

DURBIN: Amen, amen. I agree with you. Candy, it is not a way to run a government or a great country. And what we need to do is put this in perspective. I watched your coverage on Japan. I've listened to things we face as a nation. And I think it's time for people of good will in both political parties to sit down, work this out. Let's resolve the budget for the rest of the year. If there are going to be new revenues or cuts in other areas, let's get it done. Let's move on and move forward. We need to be thinking about the rise in gas prices and what that means in terms of our economic recovery in this recession. The fact that we're spending $1 billion a day as a nation importing oil. These are things which call out for us to be thinking in bipartisan terms to come up with an energy policy that serves our nation.

CROWLEY: What do you want to do go gas prices, since you brought it up?

DURBIN: Well, I think the president's right. We need to consider moving toward the strategic petroleum reserve to put the oil we have in reserve into the economy, to try to temper this increase in gas prices. This isn't helping our recovery.

CROWLEY: Well, if I understood the president, senator, I think what he said was that the oil reserve was for when supplies are disrupted. This is not a supply problem. This is a demand problem. You want him to use that reserve to bring down gas prices, oil pries?

DURBIN: I'm worried that if we don't use the reserve, that our economic recovery will stall and fall backwards. We don't need to see unemployment figures going up, so that's my concern. But secondly, let's not overlook the obvious. We're still too dependent on foreign oil. Troubles in northern Africa have an impact on the price of gasoline right here in Chicago. We need to think about what we need to do as a nation to move forward. Responsible exploration and production right here in the United States, though we're at record levels over the last several years, we need to look and see what other things are available to us.

But beyond that, energy efficiency with a thought toward the environmental impact of the use of energy. These are things a great nation needs to do if it's going to lead into the 21st Century.

CROWLEY: Let me turn you back to one last question on the budget and play for you something Senator Manchin, a Democrat from West Virginia, had to say this week.

(BEGIN VIDEO CLIP)

SEN. JOE MANCHIN, (D) WEST VIRGINIA: This debate, as important as it is, will be be decided by House Republicans or by Senate Democrats negotiating with each other or past each other. The debate will be decided when the president leads these tough negotiations. And right now, that's not happening.

(END VIDEO CLIP)

CROWLEY: Senator, has the president been AWOL in these discussions?

DURBIN: No.

CROWLEY: What's Senator Manchin talking about?

DURBIN: Well, I think there's a perception and a frustration among members of Congress that things aren't moving to a conclusion. The president is working behind the scenes. I've met with him with leadership. I know he is reaching out to try to find some accommodation here. He is trying to reach a point where we acknowledge the obvious. We have a serious deficit problem, borrowing 40 cents for every dollar we spend.

We cannot solve this problem in six months. We have to look at it in the medium and long term for the good of this nation and for our financial reputation in the world.

But the president's establishing priorities, the most important American priorities. And I think that should guide us in the negotiation.

CROWLEY: Senator Dick Durbin, I bet you we're going to talk about the budget in 2012 pretty soon here. We thank you for being with us on this one.

BURBIN: Thanks, Candy.

CROWLEY: Up next, we'll get a response from two Republican leaders in congress.

(COMMERCIAL BREAK)

CROWLEY: Joining me now, the number two Republican in the senate, Senator John Kyl of Arizona; and the number three Republican in the House, Congressman Kevin McCarthy of California. So together, you equal five. Thank you for joining us.

Let me start out, seems we have yet another continuing resolution. And let me put the same question I put to Senator Durbin, this is just no way to run a railroad. You could have gotten together all last year. You didn't. Now you're still working on last year's budget. And guess what? This year's budget is already sitting on your plate.

What can you all give? Where can you give that this kind of stuff doesn't happen all the time?

SEN. JON KYL, (R) ARIZONA: Candy, first let's note Democrats were in charge of the House and Senate last year. Their job was to get a budget and fund the government. They didn't do that. So, when Republicans took control of the House of Representatives, the first bill they passed, and Kevin should talk about it, it's called HR-1. And it would fund the government for the rest of this fiscal year through the end of September. It has reductions in spending of $61 billion, which on a $3.7 trillion budget is not much. In fact, if you had a $10,000 budget in your home, by the way, 40% of that would be on your credit card, but you would be slashing spending according to Democrats by 28 bucks. So it's not a huge cut. So when you ask what can Republicans do, the House has put its proposed budget for the rest of the year. There were more votes for that in the Democrat-controlled Senate than there were for the Democrat alternative. And I think it's up to the president now to propose what he would do instead.

CROWLEY: Let me ask you how certain you are that you are going to be able to continue to do these kinds of stopgap measures. In particular this one. I want to first play, and it's not on your side of the Hill, but I want you to respond. This is Senator Jim DeMint talking about -- I'm sorry. This is Senator Jim DeMint, who was talking about voting against the very plan that you're talking about, that was going to cut $60 billion.

And what he said was, what we're trying to do on this is say, folks, we're not even in the ballpark of where we need to be. Similarly, on your side, you now have freshman congressmen, many of them with tea party backing, going, you know what, no, we're not going to do this continuing resolution, because it doesn't cut enough and it doesn't get to the core problem.

Have you got the votes to do this?

MCCARTHY: We will get it through, but we all agree. We don't want to run a government by continuing resolutions. But, remember, only one house...

CROWLEY: But aren't they kind of driving a party? That's what -- I mean, if enough of them decide that they aren't going to go for this, that you all haven't cut enough, you don't have the votes, do you?

MCCARTHY: We are dealing in a continuing resolution, you are just dealing with discretionary spending. No one thinks it's enough. Next month, when we deal with the budget, that's when you deal about the American dream to have a real change. But think for one instance, here we are with one lever in the house. Congress did an open debate. Democrats won amendments.

We had 90 hours of debate where anybody could bring anything up. The Democrats in the Senate haven't even produced a bill. The president didn't even call the speaker until the day before when we were going.

He enlisted the vice president to be the negotiator. They came in for one meeting, then the vice president left the country and we're only funded for two weeks. How serious are they about solving this problem?

Look, we're not going to shut down the government. We want the Democrats to step up. You can't negotiate with yourself.

CROWLEY: But what -- let me just sort of directly try again. Do you worry that there will be enough Republicans who are tired of these stopgap measures that will vote against this, that it will deny you the ability to pass the stopgap measure? MCCARTHY: We will pass the stopgap. But this is not the pattern we're going to continue down in the future.

CROWLEY: OK.

MCCARTHY: We think the Democrats need to step up and actually produce something. Our bill, H.R. 1, got more votes in the Democratic-controlled Senate than the Democrat bill. That should tell Durbin and Reid something, that they actually ought to produce a bill if they want to be in the majority.

CROWLEY: And you have, Senator DeMint, obviously, saying, you know, you're nowhere near enough of cutting. You have to somehow produce something in the Senate. Do you agree with Congressman McCarthy that the president has been absent from these talks? Senator Durbin says he has been very active behind the scenes.

KYL: He may have been talking to Senator Durbin and other Democrats, but he has not been talking to Republicans. No, he has not been around. And, yes, I agree with Kevin. If I could just show this chart one second here. What it shows is...

CROWLEY: We allow our guests to bring one prop.

KYL: Right, right, one prop. And the point is, you can see here that this is the $61 billion. You can hardly see the difference between the budget with H.R. 1 passed and without H.R. 1 passed. That's how little in effect it is. So my colleagues like...

CROWLEY: OK, so if it's so little, why are you doing it?

KYL: Well, the point is, my colleague, like Jim DeMint and others, are right when they say we could do more. The question is, what will Democrats do? Will they agree on 61. We're trying to get a bipartisan agreement here in order to build and fund the government for the rest of the year.

And we thought, and I certainly agree with my colleagues in the House, that this was a very good effort. It's significant. But you heard Senator Durbin say...

CROWLEY: But you can argue it's not really significant, because it's not very much and then argue it's significant.

KYL: You heard Senator Durbin he wasn't in agreement with any of those things. We have got to find some kind of middle ground here.

MCCARTHY: This is -- this year, if you don't start now, you have to crawl before you walk and walk before you run. If we avoid the big problems today, we force bigger problems tomorrow. That's why we stepped up today. Wait until the budget in April? This is more than about the national debt. This is about creating the American dream again.

CROWLEY: Let me ask you, because this year looks to me like it's going to be an entire year, there's no doubt that you all feel that the American people -- let's read that, voters, want you all to cut spending and that's where you are going to just drive that home every chance you get this year.

I want to show you a poll. This is a Bloomberg national poll from early March. Which priority is more important? Creating jobs, 56 percent. Cutting spending? 42 percent. Aren't you guys on the wrong track here? If 56 percent say not the cutting spending, we need jobs.

MCCARTHY: OK. What have we been focused on? Jobs and spending. Imagine what the Americans can achieve if they didn't have the burden of Washington's debt. 1099s, if you are a small business and you just go buy stamps, you equal out at the end of the year 600, you have to fill out a 1099 to send to the post office. We just repealed that.

As we go through, next week, we are going to have our jobs scenario (ph) coming in. We are focused on jobs and cutting spending, the two top items that Americans say they want.

CROWLEY: Where is the focus on jobs? Can you...

KYL: Stanford economist John Taylor talking to senators lasts week and made the obvious point that government spending crowds out private investment. If you can reduce the amount of spending by the federal government, the private sector has more money to grow and to create jobs.

There is a direct connection between government spending on the one hand and unemployment on the other.

CROWLEY: And I understand that. And that is a long-time Republican value, that you need to free up the marketplace. They can do the hiring, not the government. But the fact is, that's a slower path in some ways than saying we've got to speed up the creation of jobs in some way. And I think people look -- and regulation. But these are kind of long-term.

Like right now, what is it, 8.9 percent I think is where we are on unemployment. That 8.9 percent of Americans need a job tomorrow. They need a job next week. They don't need a job that is going to take a while while it all filters down to small business and you all...

KYL: Candy, it's a false assumption that it's a slow process. When are you able to invest money, you hire somebody. You can't do that if the government is sucking up all the credit. What didn't work was the stimulus. We spent almost $1 billion to try to quickly create jobs. You remember the "shovel ready" projects? Turned out they weren't ready. We didn't create jobs.

President Obama has had two budgets. We've gone $3 trillion in debt with those two budgets and we've lost 3 million jobs.

CROWLEY: Well, they would argue that the jobs are created and that they stopped the job loss from going higher. But let me move you just to something a little bit different. And that is the -- when Democrats look, and a lot of economists, look at this $60 billion that you want to cut out of really what basically is 2010 spending, they say that it will -- it will grind this economy to a halt. It will cost jobs.

And these are, you know, high-level economists. They know what they are talking about any more than most economists do. But nonetheless, do you not worry that you have got this fragile economy and you want to cut spending, cut spending, cut spending?

MCCARTHY: No, look, every other household had to balance and tighten their belt. American government should as well. This is less than 3 percent. Less than 3 percent. These are the same economists who said the stimulus would create jobs.

America today, the corporations have more cash on hand than they had in the last 50 years. Uncertainty is holding back investment. So when you look at the Republican budget, not only will we tackle the debt, but we'll tackle job creation, prosperity, and liberty. You will find a new tax system be able to allow the investment to end the uncertainty to invest in America, to stop forcing corporations that create money all around the world but have to keep it in other countries, but bring it back and invest it in America today.

Then we'll have an energy policy that can move us forward. You know, under this administration, our output has gone down 13 percent. Even President Clinton has criticized this president for the drilling permits. That's what's driving up costs. That's what's hurting economy. And that's what will hurt jobs in the future. That's the difference between a new majority in the House.

CROWLEY: We're down to one minute, so I want to switch to gas prices. Should the president open up that strategic oil reserve to put more supply in the country and bring down prices?

KYL: No, the problem is not supply, as all the experts will say. By the way, gas prices have doubled under Obama. And one of the reasons is because he has not issued drilling permits, including in the Gulf. And that's what President Clinton was criticizing him for. According to the DOE's own figures, we've lost 13 -- or we will lose 13 percent of the production this year. We can get American energy on-line if we simply grant the permits and so the companies can start the drilling.

CROWLEY: Can I do quickly, yes or no, should he open up that oil reserve?

MCCARTHY: No, he should open up the resources across America. And that's what the Republicans, when they produce the energy, all of the above.

CROWLEY: So you're going to go home to your constituents and say, can't do anything about these gas prices immediately?

MCCARTHY: No, I'm going to go home to my constituents and say, we have a plan to make energy in America energy independent once and for all. CROWLEY: Congressman McCarthy, Senator Kyl, thank you so much for joining us.

MCCARTHY: Thanks.

KYL: Thanks for having us.

CROWLEY: And thank you all, for watching STATE OF THE UNION. I'm Candy Crowley in Washington. Stay tuned to CNN for much more coverage of the disaster in Japan. Piers Morgan and Anderson Cooper will be live tonight starting at 9:00 Eastern.

But up next for our viewers here in the United States, "FAREED ZAKARIA: GPS."